Thinking about applying for a credit card for the first time? Or maybe you already have one but want to compare it with the benefits of another? When used responsibly, a credit card can prove to be a valuable asset in building a healthy credit history by showing lenders that you have a sensible approach to borrowing. Looking for other credit card tips on how to use credit wisely? Read on below to find answers to some of the most commonly asked questions about credit cards.
There is no definitive answer to how many credit cards you should have, but you may want to consider having more than one card depending on your spending habits and the benefits each card offers. In a previous interview, Beth Legarda from the Credit Card Association of the Philippines suggests that it's easy to have just two cards. This gives you additional credit and added flexibility. However, it's also worth being selective when it comes to the overall number of cards you have. Having additional cards may make it difficult to track your expenses, due dates, and credit limits. Worse, the access to additional credit may tempt you to spend more.
Your credit limit is the maximum amount of credit that you may borrow on a credit card account. Your bank will disclose your credit limit when you first open your credit card account, but you may be able to request an increase if you maintain timely payments and follow your card issuer's terms and conditions. Provided you are in good standing with your bank and pay your bills in full each month, you may apply for a higher limit.
While having more money to spend may provide you with some additional financial freedom, it is important to think about how you spend and whether you are able to responsibly manage a higher limit. More credit can prove useful if you are planning to make large purchases and can pay the monthly bill in full. But whether this is an option or not depends on several factors, including your credit history; there is no one-size-fits-all answer.
“An increase in credit limit is not a necessity,” Legarda explains. “It is more important to have a credit limit that suits your needs.” In other words, you should spend your credit according to your means, not based on how much you can borrow.
Credit card fees can vary depending on the type of card you choose. So understanding the kind of charges you may expect can help when considering which card is right for you.
Most credit cards will have a number of standard fees that are part of your agreement with your card issuer. Common fees include balance transfer fees, which are incurred when you move a balance from one credit card account to another, and cash advance fees for withdrawing cash against your credit limit. Some card issuers may also charge an annual fee.
If you're paying an annual fee, choosing a card that works for you – with perks that suit your spending habits – is a good way to make the most of your card. For example, it may be worthwhile paying an annual fee for a card with travel rewards or points that you're confident you'll be able to maximize. With a regular credit card, you get lower credit limits and no rewards, but also lower monthly rates and annual fees, advises On the Money's Ma. Salve Duplito. Premium cards, while having higher rates and annual fees, offer rewards like air mileage, travel insurance, and emergency services. You will want to select a card based on your monthly expenses, not based on potential rewards.
This very much depends on your personal circumstances and credit history. If you have a credit card you don't use, you may consider canceling it to avoid paying annual fees. But before you close your account, it is worth keeping a few things in mind, particularly if you have had that credit card for many years. Canceling a card shortens your credit history and lowers your debt utilization ratio. This in turn may affect your credit score. Remember: the longer your credit history, the better your score.
If you are late with a credit card payment, you may be responsible for paying a fee – but first get in touch with your card issuer to see what your available options are. Remember, late payments will reflect in your credit history and impact your credit score. Since your credit history is shared among banks, this may make it harder for you to obtain loans in the future. If your credit score is low enough, lenders may decline from providing you credit, which will make handling emergencies that much harder.
There are, of course, some effective steps that you can take to help avoid missing payments to begin with, such as setting up automatic payments or creating your own payment reminders. If you take care of your credit history, it will reward you in the future.
For any concerns, you may call us at (632) 8995-9999 or send us a message through www.citibank.com.ph.
Citibank, N.A. Philippine Branch is supervised by Bangko Sentral ng Pilipinas with telephone number (632) 8708-7087.